Adaptec 2004 Annual Report Download - page 7

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• wafer fabrication capacity;
• competition and pricing;
• critical accounting policies and estimates;
• customer product inventory levels, needs and order levels;
• demand for networking, enterprise and consumer equipment;
• net revenues;
• gross profit;
• research and development expenses;
• marketing, general and administrative expenditures;
• interest and other income;
• foreign exchange rates;
• capital resources sufficiency;
• restructuring activities, expenses and associated annualized savings; and
• our business outlook.
INDUSTRY OVERVIEW
The growth in Internet and wireless connectivity worldwide is driving increasing demand for bandwidth and efficient networks that
can manage higher levels of data traffic. At the same time, communication service providers are seeking ways to increase their
revenues by bundling and delivering a growing range of services to their customers in a cost−effective manner. To provide these
voice, data, and video services, communication service providers are transitioning their voice−centric infrastructure to data−centric
networks. Newer applications such as voice over Internet Protocol (VoIP), video−on−demand, third generation wireless services, and
network−attached storage are expected to drive additional traffic into the global network infrastructure. Commercial enterprises are
also expanding their data networks to compete cost−effectively in a world where more and more business operations require Internet
connectivity and the ability to capture, store, and access large quantities of data.
Different types of data transmitted at various speeds over the Internet require service providers and enterprises to invest in
multi−service equipment that can efficiently manage and transport the varied types of network traffic. In simplified terms, Internet
traffic moves over a hybrid series of distinct networks, with each network built using copper wires, coaxial cables or fiber optic
cables. These networks carry high−speed traffic in the form of electrical and optical signals that are transmitted and received by
complex networking equipment. To ensure that this equipment and the various networks can more easily communicate with each
other, original equipment manufacturers (OEMs) and makers of communications semiconductors have developed numerous
communications standards and protocols for the industry. These communications protocols make it easier for complex high−speed
data traffic to be sent and received reliably and efficiently — whether intra−office, across the country, or internationally.
One industry standard that packages information into a fixed−size cell format for transportation across networks is Asynchronous
Transfer Mode, or ATM. Many service providers deploy equipment that handles this protocol because it can support voice, video,
data, and multimedia applications simultaneously. Internet Protocol (IP) is another transport protocol that maintains network
information and routes packets across networks. IP packets are larger and can hold more data than ATM cells, but in some
applications may not be able to provide the same quality of service because they are not optimized for time−sensitive signals such as
video and voice.
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